In the face of a wave of redemption requests, Fortelus Capital is both giving its clients an out—and moving a quarter of its assets into a side-pocket.
The London-based hedge fund told clients yesterday that it would split its US$1 billion flagship into ongoing and liquidating share classes. The latter will hold "not readily realizable" investments that will be sold over time.
Fortelus will hold an extraordinary general meeting on June 25. In advance of that date, all of its clients will be given the chance to redeem their investments. If they choose to, they'll get 75% of their money this year, and the rest as the liquidating portfolio is liquidated.
Even clients who choose not to redeem will have a quarter of their assets put into the side pocket, the Financial Times reports.
"While a number of investors wish to redeem their investment in the funds, a number of investors have said to us that they want to remain investors but do not like the uncertainty of prospective redemptions from other investors in upcoming quarters," founder Tim Babich wrote.
Fortelus is up about 1.4% this year.
Babich said he remained upbeat about Fortelus' prospects and said he'd keep his entire personal investment in the hedge fund. Fortelus's Malta-based bank, FCM, is set to begin taking deposits this week.
"We are very excited by the prospect of investing in European distressed [debt] over the next few years," he wrote. "The events that are unfolding before our eyes will continue to create many market dislocations and there exist very few credit market participants as well positioned as Fortelus to capitalize upon these opportunities."